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HMRC internal manual

Inheritance Tax Manual

Succession: Wills: Legacies and devises: abatement

Where after payment of the deceased’s debts and liabilities there are not enough funds to pay all the legacies in full they have to be abated.

Part II Schedule 1 Administration of Estates Act 1925 sets out the rules for abatement. The same rules apply in Northern Ireland under part II Sch1 Administration of Estates (NI) act 1955.

The rules of abatement will not apply if a contrary intention is shown in the Will.

Different abatement rules apply for Inheritance Tax purposes where

  • the assets are not enough (IHTM12087) to pay the gifts in full, IHTA84/S37 (1) or
  • abatement is caused by grossing up (IHTM12088), IHTA84/S37 (2).

Rules of abatement

In general law legacies (IHTM12082) are paid in the following order:

  • specific
  • general
  • residuary.

So where there are not enough funds in the estate the legacies are abated in reverse order

  • residuary - if there is not enough to pay the other legacies then the residuary beneficiary takes no benefit
  • general - if there is not enough to pay specific legacies the general beneficiaries will take no benefit. If some funds are left after the specific legacies have been paid the general beneficiaries will take a restricted benefit. A demonstrative legacy will not abate with the general legacies until after the particular fund (IHTM12082) is exhausted.
  • specific - these legacies take priority in distribution of the assets.

Within each category of gifts, the various legacies will abate rateably.

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Toby leaves a specific holding of ICI stock worth £10,000 to Mandy, £30,000 each to his four siblings and a charity, and any residue to his two children.

At Toby’s death the estate is worth £110,000 including the ICI stock.

Abatement -

  • Mandy takes the ICI stock in full
  • The pecuniary legacies are more than the net estate. As they are all the same class of gift, each will abate rateably

£30,000 × (£100,000 ÷ £150,000) = £20,000

There is no residue.